Correlation Between Citigroup and Ternium SA
Can any of the company-specific risk be diversified away by investing in both Citigroup and Ternium SA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Citigroup and Ternium SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Ternium SA DRC, you can compare the effects of market volatilities on Citigroup and Ternium SA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Citigroup with a short position of Ternium SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Ternium SA.
Diversification Opportunities for Citigroup and Ternium SA
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Citigroup and Ternium is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Ternium SA DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ternium SA DRC and Citigroup is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Citigroup are associated (or correlated) with Ternium SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ternium SA DRC has no effect on the direction of Citigroup i.e., Citigroup and Ternium SA go up and down completely randomly.
Pair Corralation between Citigroup and Ternium SA
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.73 times less return on investment than Ternium SA. But when comparing it to its historical volatility, Citigroup is 2.07 times less risky than Ternium SA. It trades about 0.07 of its potential returns per unit of risk. Ternium SA DRC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 510,950 in Ternium SA DRC on August 24, 2024 and sell it today you would earn a total of 424,050 from holding Ternium SA DRC or generate 82.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.38% |
| Values | Daily Returns |
Citigroup vs. Ternium SA DRC
Performance |
| Timeline |
| Citigroup |
| Ternium SA DRC |
Citigroup and Ternium SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Ternium SA
The main advantage of trading using opposite Citigroup and Ternium SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Ternium SA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Ternium SA will offset losses from the drop in Ternium SA's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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